Financial accounting worksheet with answers

Which of these increases a sole trader's capital (equity)?

1. ARepaying a bank loan
2. BBuying inventory for cash
3. CDrawings by the owner
4. DA profit for the year

A customer pays in advance for services the company will provide next year. At year end the money is shown as:

1. AAn expense of this year
2. BA non-current asset
3. CRevenue of this year (cash received)
4. DA liability (deferred revenue)

Gross profit is:

1. ARevenue minus all expenses
2. BTotal assets minus total liabilities
3. CCash in minus cash out
4. DRevenue minus cost of goods sold

Which error will NOT be revealed by a trial balance?

1. AA balance copied to the wrong column
2. BA wrongly added ledger column
3. CA sale left out of the books entirely
4. DA debit posted without a matching credit

Revenue is €200,000 and cost of sales is €140,000. What is the gross profit margin?

1. A30%
2. B43%
3. C70%
4. D60%

The prudence (conservatism) concept suggests that accountants should:

1. AValue assets at their selling price
2. BAlways record the highest possible profit to attract investors
3. CIgnore possible losses
4. DAvoid overstating assets and income under uncertainty

Under the IAS 16 revaluation model, a building is revalued upwards for the first time. Where does the gain go?

1. ATo a provision on the balance sheet
2. BTo other comprehensive income and a revaluation surplus in equity
3. CTo revenue in the income statement
4. DTo retained earnings as a realised profit

Under the matching principle, the cost of a product warranty sold with goods this year should be:

1. ARecorded as revenue
2. BEstimated and recognised as an expense in the year of sale
3. CRecognised only when a customer actually makes a warranty claim
4. DIgnored until the warranty expires